Victor Ugochukwu · Dec 14, 2020 . 5min read
Coinbase CEO: Ousted Trump administration trying to sneak in adverse regulation on Non-custodial wallets
Brian expatiated on the adverse effects should the policy be implemented. Coinbase CEO laid why the non-custodial wallet policy would be such a bad move.
By Victor Ugochukwu · Nov 26, 2020 . 7min read
CEO of Coinbase a crypto unicorn and giant cryptocurrency exchange took to Twitter recently to voice out his displeasure on an alleged regulatory action by the outgoing Trump administration targeting non-custodial wallets.
Brian Armstrong in his tweets said
Last week we heard rumors that the U.S. Treasury and Secretary Mnuchin were planning to rush out some new regulation regarding self-hosted crypto wallets before the end of his term. I’m concerned that this would have unintended side effects, and wanted to share those concerns.
To begin with, the regulation, if implemented, will require financial institutions like Coinbase to verify the recipient/owner of the self-hosted wallet, collecting identifying information on that party, before a withdrawal could be sent to that self-hosted (non-custodial) wallet.
Brian went further to expatiate on the adverse effects should the policy be implemented. In the thread, Coinbase CEO laid why the non-custodial wallet policy would be such a bad move. His nuances gravitate especially against the United States, maintaining its position as the capital for innovation.
Coinbase CEO on why the alleged policy targeting non-custodial wallets is anti-innovation
Firstly, this would be impractical for regulated financial institutions to mandate DeFi protocol users to send information as to the smart contracts they are sending funds into. Imagine mandating a Coinbase user to submit information as to the owner of a liquidity pool on Uniswap?
How about asking non-custodial wallet users to collect information from merchants they purchase from online? Doesn’t seem pragmatic, Brian laid out.
Furthermore, the CEO of Coinbase pointed out how difficult it is gathering information from those in the emerging world. With a high level of poverty and constant changing of address, it’s nearly impossible to gather decent KYC info.
And crypto isn’t just for financial applications as the use cases keep growing. For instance, Brian brought up the use case of upvoting content on Reddit or in a game application. The alleged regulation on non-custodial wallets will constitute a terrible user experience. This is precisely what Brian is putting forward on this point.
The United States would be losing more than gaining if it goes ahead to “attack” non-custodial wallets.
Brian Armstrong clearly posits that all the scenarios will only make it more difficult to use crypto in general. Cryptocurrency space always pushes forward a maxim “not your keys, not your coin”. Asides the fact that non-custodial wallets give crypto owners control of their assets, it also promotes privacy. The CEO goes ahead to say
Given these barriers, we’re likely to see fewer transactions from crypto financial institutions to self-hosted wallets. This would effectively create a walled garden for crypto financial services in the U.S., cutting us off from innovation happening in the rest of the world.
Perhaps regulations like this were why exchanges like Binance came from the rear and within a short time overtook the likes of Bittrex and even Coinbase. The exchange CEO noted that he and a host of other stakeholders had sent a letter to the Treasury Department last week.
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